A farmer harvested potatoes at a field in a village near Allahabad, Uttar Pradesh, March 12.

The food security bill promises to alleviate hunger and guarantee very cheap food to India’s poor but there are concerns it has not been properly thought through and could become unsustainable.

P. K. Joshi, South Asia director of the International Food Policy Research Institute, a think-tank headquartered in Washington, talked to The Wall Street Journal about the pros and cons of the bill and what it will mean for India. Edited excerpts:

The Wall Street Journal: The food security bill sounds like a positive thing for India’s poor. Is it?

Advertisement

P. K. Joshi : It’s a good attempt by the government to ensure food and nutritional security for people who don’t have access to food at a subsidized rate.

The bill will extend subsidized food to pregnant women and children under the age of 16. It is positive that it is including those who really need nutritious food.

The government says it will guarantee food at very cheap rates of between one and three rupees per kilogram to up to 70% of the population.

Under the program everyone who qualifies for the subsidy will be entitled to 5kg in total of rice, wheat, pearl millet and sorghum (a cereal).

Rice will be sold at a subsidized rate of three rupees per kilogram; wheat for two rupees per kilogram; coarse cereals at one rupee per kilogram.

It will be up to states to decide how much of each food stuff each person will get at these rates.

WSJ:How much will all this cost?

Mr. Joshi: This is a mega program and will require a huge food subsidy. The cost of it will go up from 0.8% of Gross Domestic Product to around 1.1% of GDP. This is a serious increase in a situation where the government does not have enough resources as it is.

Take rice for example. The government purchases the grain at an economic cost of 18 rupees ($0.33) per kilogram. This includes the price it pays the farmers, the cost of stocking the food and distributing it.

Under the bill, the government will sell the food to ration card holders at between one and three rupees per kilogram, which is a subsidy of 16 rupees per kilogram.

The government says it will provide 62 million tonnes of food a year under the bill and the size of the subsidy is estimated around $24 billion.

Even if the quantity of food remains the same each year, the food subsidy bill will increase annually. As the cost of food goes up (because of wage increases and oil price rises,) the amount that the government sells the subsidized food for will remain the same.

It’s likely, because of a rising population, that the quantity of the food supplied will also increase.

Given the rising costs of the scheme, its sustainability is under question.

WSJ:Who will be entitled to subsidized food?

Mr. Joshi: This is another issue. How are you going to target the beneficiaries? What are the indicators of the poor? Who is really poor and who is not?

The bill says that states will provide the list of the poor but they have no such records. The government has constituted various committees to look at measures of poverty but they come up with different numbers.

WSJ:How will the food reach those who are entitled to it?

Mr. Joshi: The government intends to use the Public Distribution System for delivering subsidies to the poor. The PDS is already used to deliver food subsidies to the poor but around 51% of the food delivered that way is currently lost to leakages. It is sold on the open market for a higher price.

Extending the PDS might make another channel for these leakages.

The government is also considering using direct cash transfers. In cases where the government is not able to make food available in the PDS then they will give cash payments to be used for food directly into people’s bank accounts.

The Delhi government has already started distributing subsidized food using the PDS but also started direct cash transfers for kerosene allocations. This was unsuccessful because people had the cash but there was no kerosene for them to buy. It is yet to be seen how this will unfold for food.

WSJ:Can India produce enough food to cope with the demand created by the bill?

Mr. Joshi: This is another issue bothering people: What are we going to do in a drought or a flood? The production of rice and wheat might come down dramatically. If we are entering the global market then the global price would shoot up along with the subsidy bill.

If this situation prevails and climate change takes, place what is going to happen?

WSJ: What does all this mean for farmers?

Mr. Joshi: The very low prices of the subsidized food will distort the market and farmers who can’t sell to the government-assured program will lose out on the open market because prices will be forced down.

WSJ: How will the program be rolled out?

Mr. Joshi: Things are not very clear how it will be initiated. Every district will have a grievance officer who will deal with complaints about implementation at the local level. We don’t know how that will function but they have the authority to punish people who are not giving out the food.

Each state will have a food commission to oversee the program.

Many states, including Chhattisgarh, Tamil Nadu and Delhi already have a subsidized food program so it is unclear how the two will run together or whether it will create confusion in both.

WSJ:How would you improve the bill?

Mr. Joshi: We should have learned lessons from the Mahatma Gandhi National Rural Employment Guarantee Act (which provides 100 days of work to the poor at 100 rupees a day) and strengthened it to make it more effective to help the very poorest. Those who are part of that program should be targeted for this subsidy.

Or we could link it to education as they did in Bangladesh where school children and their families were given access to subsidized food.

The bill should have included subsidized rates for pulses which for many of the poorest are their only source of protein and highly nutritious. The price of pulses has gone up, making them out of reach for many.

WSJ:Is a defective food security bill better than none at all?

Mr. Joshi: This bill should come, we should help the poorest of the poor. But I feel that it should be targeted only to the poor. Right now it’s targeting 50% of the urban population and 75% of the rural population.

We need to reduce the leakages from the distribution system and make it transparent. This is happening in Chhattisgarh where 98% of the food is going to the right person. When the food arrives in stock, those entitled to it receive a message on their cell phones to alert them.

About India Real Time

India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.